Archive for the ‘News Items’ Category

Given the growing frequency and severity of hacker attacks on financial institutions (JP Morgan yesterday, for example), and given the estimated potential for information damage by an electromagnetic pulse weapon, I recommend that you keep paper statement for all of your investment, banking and other financial accounts.

We made the same recommendation back in 2011 in a SeekingAlpha article about personal financial security best practices. It made sense then, and makes more sense now as the frequency and severity of attacks increases.

Stealing your account access data, or actually stealing your money in an attack on some institutions is bad, but probably compensable by the compromised institution or their insurers. However, if a major foe were to attack in a way that simply deleted or scrambled account data throughout an institution (or many institutions simultaneously) you may spend months or years waiting (and hoping) for recreation of your account data and access to your money, particularly if they were able attack backups somehow.

Data disaster sounds like science fiction, but simply keeping paper statements could make all the difference in the event that such an attack takes place. Those with paper statements are likely to be resolved first (or at all).

JP Morgan, which suffered a massive data breach yesterday, is reported to spend $200 million per year on data security, yet all that was penetrated. They are likely as good as any institution. The bottom line is your data, and perhaps access to your money is potentially at stake.

Print out or take mail delivery of paper statements, and retain recent copies just in case.

The California pension system (CALPERS) is an enormous fund of $238 billion. Yesterday, the consulting actuaries for the fund recommended lowering the total return assumption to 7.25% from 7.75%, last set in 2004. Prior to 2004, the return assumption was 8.25%.

While individual investors do not have the same constraints of such a large fund, this recommendation should be taken on board as further confirmation that expectations must be moderated from long-held assumptions from decades past.

The return assumption change will increase the funding requirements for the fund, which translates to higher operating costs for the state, and an incremental reduction in the credit quality of the state.

According to CALPERS, the liabilities are 75% funded at this time, but Stanford University researchers, according to Bloomberg, believe that a 6.2% return is more realistic, which translates to 58% funding of liabilities.

Today, Win Thin, emerging markets at Brown Brothers Harriman, said on Bloomberg Radio that Russia is essentially an oil economy, and that while not long ago its budget break-even was as $45 per barrel of Brent Crude Oil; the break-even now is about $117.

That is quite significant given the current Brent price and the price history.

This chart plots the price of Brent and the percentage performance of the Russia stock ETF (RSX).